Monday, September 30, 2013

USD US Dollar Weekly and Daily Charts Falling Wedge Sideways Channel Death Cross

The dollar is weaker this morning to 80.20. This keeps the euro at 1.35 or higher which hurts the European economy. The euro will likely have to weaken to help the recovery across the pond which would provide dollar buoyancy moving forward. The charts are interesting since, in a nutshell, the daily says up and the weekly says down. So nimble traders are provided opportunities with the dollar bulls likely winning out as time moves forward. The dollar weakness occurs as the Fed continues to print money and pump the QE crack cocaine into long equity trader's veins. The black circle shows a death cross (50 crosses under the 200) which signals further dollar bearishness moving forward, however, as often highlighted on the site, a death cross typically occurs and price will bounce, just as a golden cross will occur and price will typically pull back down. If the death cross remains it will point to further weakness in the weeks and months ahead but over the near term 

The weekly chart shows a 2-year sideways channel controlling the price action through 78.80-83.50. Global currencies and yields will likely move sideways for many months forward. Price is leaking towards the lower rail. The 200-week MA at 79.85 would be an extremely important support test. Since the green falling wedge is in play (bullish) and the stochastics are oversold, the dollar should base in this 79-81 area moving forward. The histogram is already content with the dollar bottoming and now moving sideways to sideways higher, however, the other indicators are weak and bleak (red lines). Thus, after a bounce occurs, the indicators want to see a lower low on the weekly basis.

That bounce should occur due to the positive aspects of the daily chart, which is 180 degrees opposite of the weekly chart. The daily chart is very bullish with positive divergence across all indicators (green lines) so the drop in the dollar today is likely a very attractive long entry point--for the nimble traders since the weekly chart weakness will likely reassert itself in the days ahead. The UUP ETF is the long dollar play and it is positively diverged on the daily chart as well. A bounce is expected from the green circle. The top rail of the falling wedge on the weekly is at about 80.7 and note on the daily this is overhead resistance, thus, an attractive upside target, then 81. In summary, dollar should bounce in the near-term, for a few days, then some weakness will reassert due to the weekly chart, then the dollar should bottom and move sideways to sideways higher for the weeks and months ahead. So dollar longs can likely be scaled into beginning today and depending on the amount of bounce, the position can simply be added to over time moving forward, or, profits taken on the bounce, and then reload once price comes back down as per the weekly chart. Note that traders are the least bullish on the dollar since April. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

Note Added 7:10 AM on 10/1/13:  The dollar drifts lower overnight printing a 79 handle now recovering back above 80. The 200-week MA support is in play at 79.87.

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